Bo-eun leads the digital content team. She has covered foreign affairs, North Korea, tech, economy and gender issues at The Korea Times. She did a short stint at the South China Morning Post in Hong Kong, where she obtained a new perspective on news production and life. Small sources of joy for her are lounging in the sun, having a good latte and swimming.
Will KDB be able to sell life insurance unit this year?
KDB Life Insurance's headquarters / Captured from KDB Life Insurance's website
By Kim Bo-eun
By Kim Bo-eun
Korea Development Bank (KDB) has shown strong willingness to sell off its insurance unit by the end of this year, but what appears as a lack of interest from potential buyers is set to slow down the process.
What will make it more difficult for the state-run lender to find a buyer is Prudential Financial's attempt to sell its Korean Unit, Prudential Insurance Company of Korea, which is considered much more attractive both in its profitability and financial soundness than KDB Life.
According to media reports, the U.S. top life insurer has hired Goldman Sachs as a lead manager to explore the possibility of the sales of the nation's 11th largest life insurer by total assets as of June.
KDB Chairman Lee Dong-gull has pledged to provide a hefty bonus of up to 4.5 billion won ($3.85 million) for KDB Life Insurance's management if they succeed in the sale, as this is KDB Life's fourth attempt.
KDB said that it is accepting candidates for a preliminary bid through the end of November.
While KDB declined to confirm, reports have stated that only a few private equity firms have submitted their intentions to take part in the preliminary bid so far.
Hopes are that KDB Life, the nation's 13th-largest insurer by total assets, will be taken over by a major financial group.
Among the four major groups, Woori and KB have shown interest in acquiring a life insurance unit.
Woori has been seeking to strengthen its non-banking business, and acquiring an insurance unit is among its plans.
Yet a Woori official said, "The group will not buy additional units within the year, to maintain financial stability."
The official added, "Maybe the group will consider an M&A in the first quarter of next year."
But he said the priority will be acquiring a capital firm, followed by a savings bank, a brokerage and then an insurance company.
"It will be a burden to have to increase capital base in line with the introduction of IFRS17," he said, referring to the new set of accounting standards with stricter definition of debt that will be introduced in 2022.
Based on such circumstances, it appears KDB will struggle to sell its insurance unit for more than the market's minimum estimate of 200 billion won.
KDB Life's net assets amount to 1.13 trillion won ― total assets at 19.44 trillion won and total debts at 18.31 trillion won. Multiplying the figure to the price to book value ratio (PBR) of Hanwha Life Insurance which is 0.2, KDB Life's value comes down to 226.6 billion won. Hanwha is one of the top life insurers.
The PBR, the ratio of market value of a company's shares over its book value of equity, reflects the value that market participants attach to a company's equity relative to its book value of equity.
Without management premiums, it is highly likely that the troubled insurer will be sold at around the price.
KDB chief Lee said in October that markets estimate the value of the troubled insurance company at between 200 billion won and 800 billion won.
A KDB official said the state-run bank will seek to proceed with the sale of KDB Life as planned.
KDB took over the insurance unit in 2010 for 650 billion won. It has tried to sell off the company three times since 2014.